Chapter Eight Flashcards
Three Levels of Strategy
Business-level strategy, corporate-level strategy, and international strategy
Business-level strategy
How to get and maintain a sustainable competitive advantage? Level of diversification.
Company-level strategy
What business(es) should we be in? How should we manage the portfolio to achieve synergy / create value? Nature of integration.
International Strategy
Where will you place yourself internationally?
How to diversify
Mergers and acquisitions, strategic alliances, joint ventures, and internal development
Mergers and acquisitions
Merging between two companies or acquiring another company
Strategic Alliance
Two or more companies decide to share resources to undertake a project (Starbucks in a barnes and noble)
Joint venture
Two or more companies form or birth a third company
Internal development
company develops and launches the new business themselves
Related diversification
Expanding into industries with meaningful linkages to the current business (Disney expanding from animated movies into theme parks)
Unrelated diversification
Expanding into industries that have no significant connections to the existing business
Retrenchment
Scaling back resources or reducing costs to stabilize operations (reducing workforce or closing underperforming facilities)
Vertical Integration
The business arrangement in which a company controls different stages along the supply chain or value chain
Backward vertical integration
A firm moves back along the value chain and enter’s a supplier’s business (a bakery purchases a wheat processor or a wheat farm)
Forward vertical integration
A firm moving further down the value chain and enters a buyer’s business. (a microbrewery buys a pub)
